VUN: Vanguard US Total Market ETF (stock review 2024)

The Vanguard US Total Market ETF is a popular index fund. It’s ideal for investors who are looking for a low fee exposure to the US Market. In this post, we will discuss VUN’s strategy, dividend yield and stock performance. We will also compare VUN to VFV and VTI.

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What’s the objective of VUN ETF?

VUN seeks to track the performance of a broad U.S. equity index that measures the investment returns of primarily large-capitalization. In other words, this fund is a way to obtain exposure to the US economy. Since, the index covers a large number of equities, it’s pretty representative.

You would want to acquire this funds for two reasons:

• You are bullish on the US economy in general;
• to diversify your existing Canadian portfolio of investments with a US component.

VUN managers follow a passive strategy. Meaning, the managers are simply replicating the performance of an existing index. All the details regarding the index, being tracked, are discussed in the section below.

What’s the US Total market index?

The US Total Market Index is managed by the Center for Research in Security Prices. The index includes nearly 4,000 constituents. So, when you’re buying VUN you will achieve, before fees and expenses, the performance of a large basket of US equities. The index includes:

• large, mid, small and micro capitalizations. Large caps represent 70% of the overall portfolio;
• value and growth stocks, consequently it’s diversified across investment styles.

The methodology used by the index to select constituents can be found below:

• when selecting constituents, emphasis is placed on minimizing unnecessary index turnover;
• the index is reconstituted quarterly;
• market cap of constituents is float adjusted.

VUN dividend yield and historical performance

Table 1: AUM and MER

VUN is not ideal for investors who are looking for dividend income. It’s more suited for investors who seek long term growth. Please check our post on the Best Canadian monthly dividend ETF – 2023.

VFV vs VUN

In this section, we will compare VUN to VFV S&P 500 Index ETF. From an exposure point of view, both ETFs have the same goal, which is to offer investors exposure to the US Market. VUN has the advantage of being more diversified. For instance, VFV invests primarily in large US caps and has only 500 constituents. VUN includes small, mid, and large caps and has over 4,000 equities.

In terms of MER, VFV has a very low MER at 0.08% compared to 0.16% for VUN. Both VUN and VFV has a similar level of volatility and risk.

Since VFV invests in the largest 500 companies in the US economy, one can argue it offers exposure to ‘high-quality stocks’.

In essence, choosing between VFV and VUN comes down to personal preference. S you can see below, both had an excellent performance in the past five years. I am personally a big fan of the S&P 500 index because of the quality of its constituents and the diversification it offers across various sectors of the US economy.

Updated daily – VUN Stock

VUN vs VTI

VTI is the Vanguard Total Stock Market ETF. It trades in US dollars and is offered by Vanguard on the US stock exchange. In fact, VUN holdings are simply 100% in VTI. So, the question that most investors ask:

• should I invest directly in the US listed ETF (VTI) or buy the Canadian equivalent VUN?

There are three key differences between these two ETFs:

• VUN has higher management fees than the US listed version VTI. The difference is (0.15% for VUN – 0.05% for VTI = 0.10%);
• Since VTI is US listed it has to be acquired in US dollars;
• Taxation wise: if you hold VTI in an RRSP you can be exempt for the 15% tax withheld on non Canadian dividend payments.

In a nutshell, if you are investing in a TFSA, both ETFs will incur the 15% withholding tax on dividends. The only differences that will matter is the management fees and foreign exchange cost. Since the difference in terms of fees is small, I personally would rather own VUN avoid the foreign exchange cost.

In an RRSP, I would still stick to VUN as the dividend yield on VTI is only 1.21%. It’s not high enough to justify the switch.

VUN Sector breakdown

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VUN Morningstar rating

The Morningstar rating for VUN is 4 stars:

VUN holdings